Posts
Global Collapse In Auto Sales Coming Up
9
Junly, 2012
In
response to my post Plunging
New Orders Suggest Global Recession Has Arrived I
received a couple of interesting emails from readers, one from the
US, the other from an employee of the world's largest automotive
parts manufacturer.
Small US Distributor Responds
Dear Mish,
I am a small distributor and sell mostly to online stores. In the past 3 weeks, our business has dropped off a cliff.
Our retail store that usually has 5 orders a day, has had 1 in the past week. I also have a customer with an Amazon store and he has gone from 10 orders a day to a total of 1 order all this week.
Moreover, I have spoken with a number of other distributors and they are all begging for business. There is a dead silence in the buyers right now.
Something is definitely happening and it isn’t good. The numbers are not showing the real depth of this. I think we may see them fall off hard in the next 90 days.
Tom
Employee
of German Manufacturer Robert Bosch Responds
Hi Mish,
Love your blog. I've written before.
I work for Robert Bosch in Germany. We make diesel injectors for common rail systems (truck and passenger car).
Our sales forecasts are again down and there is a huge crunch now to save money to try to squeeze out a profit at the end of the year. Sales are down 10% to business plan so they are looking for every dime right now.
The retiring CEO (Ferhnback...a good man) wishes for a "black 0" at the end of the year. However, I doubt that will happen.
Numerous older people have been given incentives to leave the company before official retirement age.
There are numerous closure days still planned. I would guess we can expect more.
So what you are seeing in the PMI is reality. I do not see or hear similar hints in the rest of the German economy yet......
Regards,
Name Withheld by Mish
Robert Bosch GmbH (commonly known as Bosch) is a German multinational engineering and electronics company headquartered in Gerlingen, near Stuttgart. It is the world's largest supplier of automotive components.
Bosch's core products are automotive components (including brakes, controls, electrical drives, electronics, fuel systems, generators, starter motors and steering systems), industrial products (including drives and controls, packaging technology and solar panels) and consumer goods and building products (including household appliances, power tools, security systems and thermotechnology).
Bosch has more than 350 subsidiaries across over 60 countries and its products are sold in around 150 countries. Bosch employs around 303,000 people and had revenues of approximately €51.4 billion in 2011. In 2010 it invested around €3.8 billion in research and development and applied for over 3,800 patents worldwide. In 2009 Bosch was the leader in terms of numbers of patents at the German Patent and Trade Mark Office (GPTO) with 3,213 patents.
Global
Auto Sales Collapse On The Way
Anecdotes are personal by definition, and thus cannot tell the full story.
However, anecdotal evidence is in sync with a collapse in new manufacturing orders globally as noted in Plunging New Orders Suggest Global Recession Has Arrived (same as link at top, repeated for convenience).
For more details on the US specifically, please see US Manufacturing ISM Contracts for First Time in Three Years; New Orders and Prices Plunge; Perfect Miss: 0 of 70 Economists Polled By Bloomberg Expected Contraction
Given the nature of Bosh's business, the reported slowdown in that business, and a plunging collapse in new manufacturing orders virtually everywhere, a collapse in global automobile sales is coming.
Perhaps there is one more channel-stuffing rise in sales coming up in the US (sales are reported when cars are delivered to dealers, not when consumers buy them), but if so, it will be the last big hurrah.
Get
ready for the end of record corporate profits
By
MATTHEW CRAFT, Associated Press
8
July, 2012
For
almost three years, no matter what has rattled the financial markets
— a debt crisis in Europe, high gasoline prices, a slower economy —
investors have been soothed by rising corporate profits.
The
storyline became as predictable as a soap opera's. But when the
latest round of corporate earnings starts rolling in this week, look
for a twist: Profits are expected to fall.
"China
is still slowing. Manufacturing numbers in the U.S. are weak,"
says Christine Short, senior manager at Standard & Poor's Global
Markets Intelligence. "You can only have so many things working
against you."
Stock
analysts expect earnings for companies in the Standard & Poor's
500 index to decline 1 percent for April through June compared with
the year before, according to S&P Capital IQ, the research arm of
S&P.
That
would break a streak of 10 quarters of gains that started in the
final quarter of 2009.
Over
recent weeks, a motley collection of chain stores, steel producers
and technology titans have warned of slowing profits. They all point
to similar culprits — flagging sales to Europe and slower economic
growth in China.
Procter
& Gamble, the world's biggest consumer products company, cut its
profit outlook for the year, blaming sluggish economic growth in
China and Europe along with a stronger dollar, which makes U.S.-made
goods more expensive abroad.
Ford
said it expects to take a hit from European sales and may have to
shut an assembly plant. Nike reported a drop in profits and warned of
tough conditions in Europe and China. And that's just within the past
month.
"You've
seen the evidence," says Adam Parker, chief U.S. equity
strategist at Morgan Stanley, the investment bank. "A ton of
companies have already told you the economy is slowing."
The
list of companies that have warned of trouble is long and varied, and
includes well-known names such as McDonald's, Cisco, Starbucks and
Tiffany & Co.
Add
them up, and 94 companies have lowered their estimates for this
earnings season, which begins on Monday when Alcoa, the aluminum
maker, reports its results. Only 26 have raised their estimates.
Morgan
Stanley's research team says the ratio hasn't been that lopsided
toward the negative since the summer of 2001, when the economy was in
the middle of an eight-month recession brought on by the bursting of
a bubble in technology stocks.
Europe's
debt crisis has been a problem for nearly three years, but that never
stopped companies from reporting record profits quarter after
quarter. The U.S. economy appears to be losing speed, but the
economic recovery has moved at a fitful pace since the Great
Recession ended in 2009. So what makes this time different?
The
price of oil and the dollar. Oil dropped 26 percent from the start of
April to the end of June, while the dollar rose 5 percent against a
basket of major currencies. In a note to clients, Parker called this
duo "the worst combination for S&P 500 earnings."
Cheaper
oil is usually considered a good thing. By pulling down the price of
gasoline, it essentially puts money in Americans' pockets.
It's
a different story for Exxon Mobil, Chevron and other oil and gas
companies in the S&P 500. For them, a drop in oil prices squeezes
profit. And because energy companies play such a large role in the
S&P 500, Parker said, their falling profits weigh on the group.
The
direction of the dollar matters because U.S. companies rely on
overseas sales: Nearly half of all the revenue for S&P 500
companies comes from abroad.
When the dollar climbs, it diminishes
the value of those foreign sales. Parker found that since 1975, an 8
percent gain for the dollar against major currencies knocked earnings
down by 2.6 percent.
To
be sure, companies sometimes cut their profit expectations too
deeply, a practice that provokes grousing among many investors. They
suspect companies of setting the bar so low that they'll soar over it
and get rewarded with a roar of applause and a higher stock price.
In
early April, companies had talked down their forecasts so much that
analysts expected first-quarter earnings to be down 0.1 percent for
the S&P 500. A couple of months later, the final figures looked
starkly different: Earnings rose 7.5 percent.
That
history is one reason many analysts and investors say they believe
this earnings season won't be quite as bad as current forecasts. Not
as bad, of course, isn't the same as good.
"Could
they beat it? Sure," says Bill Stone, chief investment
strategist at PNC's asset management group. "They'll probably
jump over the bar. But they're not going to set the world record for
the high jump."
Negative Yields In France For First Time, Record Negative Rates in Germany; 10-Year Yield Back Above 7% in Spain, Above 6% in Italy
9
July, 2012
Add
France to the list of eurozone countries with negative short-term
interest rates. The Wall
Street Journal reports France
Joins Germany to Sell T-Bills At Negative Yield
France joined a handful of euro-zone countries Monday in selling short-term debt at negative interest rates as investors seek alternatives to expensive German and Dutch debt.
The negative yield at Monday's German auction, the lowest on record in this maturity segment, means that investors effectively pay the German state for the privilege of holding its debt.
The Dutch State Treasury Agency had already sold Treasury Certificates, or short-term debt, at negative yields. Now the French government is doing so as well.
Select
Yields From WSJ
- Germany: Germany sold 3.290 billion euros of six-month Treasury bills, known as Bubills, at an average yield of -0.0344%. The record lows was previously -0.0122% seen at an auction Jan. 9.
- France: France sold EUR 3.917 billion of 13-week Treasury bills at an average yield of -0.005%, down from 0.048% a week ago, and it sold EUR 1.993 billion of 24-week Treasury bills at an average yield of -0.006%, down from 0.096% last week.
Supposedly, French yields of -.005% are a veritable "bargain" compared to German yields at -.0344%Unforeseen Consequences
The Journal notes "Several large money-market funds restricted or closed their European funds to new investments after the ECB cut the deposit rate to zero, as they have struggled to provide returns to investors. This emphasizes the unforeseen effects of the extreme monetary policy actions that are currently being carried out by the ECB," said Rabobank's fixed-income strategists.Unforeseen of Ignored?
It should be easy to foresee such effects.
In the US, the seen effects are the impacts of low rates for those on fixed income. In addition, record low rates makes it impossible for pension plans to meet their over-optimistic goals of 8% annualized returns when interest rates are near zero.
Bernanke has to understand these things. If so, he simply chooses to ignore them for the benefit of banks over everyone else. What he fails to understand is he is doing no one any favors!10-Year Yield Back Above 7% in Spain, Above 6% in Italy
As short-term yields plunge in Germany, France, and the Netherlands, long-term yields are soaring elsewhere in Europe.
Yield on 10-Year Spanish Government Bond closed at 7.062%
Yield on 10-Year Italian Government Bond closed at 6.015%
As I have repeatedly said, nothing has been solved. It took less than a week this time for yields to head back North.
Debt
desperation: France joins Germany to sell T-Bills at negative yield
France
joined a handful of euro-zone countries Monday in selling short-term
debt at negative interest rates as investors seek alternatives to
expensive German and Dutch debt.
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